* CEO - all contaminated stocks removed from market;
* Contamination caused by human error
* CEO says up to Fonterra board to decide on his future
* Fonterra units gain more than 1 pct
* Global auction suggests trade will still pay premium for
NZ dairy produce
By Naomi Tajitsu
WELLINGTON, Aug 7 The chief executive of New
Zealand's Fonterra said his future was up to the board
of the world's biggest dairy exporter after human error resulted
in some of its products being contaminated and shipped around
Theo Spierings, a Dutchman and dairy industry veteran,
sought on Wednesday to reassure customers and worried parents
who feed their infants with formula milk made from Fonterra's
whey protein concentrate, saying all tainted stocks had been
taken out of the market and there was now little or no risk to
New Zealand, which depends on the dairy industry for a
quarter of its total exports, has been gripped by worries that a
raft of recalls for infant formula in China, a major market, and
other countries could snowball into a slump in demand or even
bans for other dairy products.
Fonterra said at the weekend it had discovered whey protein
products that contained a bacteria that can cause botulism. It
said previously its tests had found the contamination in a dirty
pipe at one of its plants. No illnesses have been reported due
to the contamination.
Spierings, who rushed to China at the weekend to apologise
for the scare and try to win back customer confidence, said the
situation there was stable. "I said at a press conference in
China that I would not leave before the situation was stable
from the perspective of markets, consumers, customers and global
authorities," he told reporters at the company's headquarters in
Auckland. "We had all those discussions yesterday, and I decided
late last night that the situation is stable."
Asked if he would resign over the company's handling of the
scare, Spierings, who joined Fonterra in 2011, said: "It's not
up to me to answer, that's up to the board."
He said affected customers, including The Coca-Cola Co
, Danone SA and China's Wahaha, had been focused
on removing potentially contaminated products from shelves,
rather than on compensation.
"There has been not a single discussion with me and their
top teams on money so far. But there will be these discussions
later on," Spierings said.
Fonterra's plans to expand in China with more farms, an
ultra heat-treated milk plant and branded baby formula remained
on track, he added.
Units in Fonterra's Shareholders Fund, which offer outside
investors exposure to the cooperative's farmer shareholder
dividends, rose 1.15 percent to NZ$7.03, and have erased almost
all of their losses since news of the scare first broke.
Questions remained over Fonterra's promptness in disclosing
the contamination issue and its dealings with the Ministry of
Primary Industries (MPI).
"There's definitely some time there that we're not happy
with - how long it took to get to work with the MPI, to give
them some information, so this is going to be part of our
review," said Gary Romano, Fonterra's managing director of New
Zealand Milk Products.
The MPI, which has despatched people to work in Fonterra
offices to oversee the crisis response, said it was asking
questions about the reporting timeline and Fonterra's processes.
Finance Minister Bill English told parliament earlier that
the scare did not appear to have had much impact on the economy,
but would need careful handling if Fonterra and New Zealand were
to continue to benefit from high commodity prices.
"The indications are that, providing the issue of the
potential contamination is handled effectively and
transparently, the direct impact on the New Zealand economy can
be contained," he said.
But Trade Minister Tim Groser said New Zealand had a lot of
work to do to regain trust among global customers. "The market
is being very measured in its reaction, in the same way that
Chinese authorities have been very measured in their actions,"
he told Radio New Zealand. "Having said all those positives,
let's agree that we're not out of the woods here, this problem
is not now settled in any sense of the word."
David Mahon, Managing Director of Mahon China Investment
Management, a China-based New Zealand consultancy, said it could
take "many weeks and months for New Zealand to repair the
perception of the integrity of its clean, green image - it's
claim of being '100 percent pure'."
"Perhaps we can re-brand ourselves as being '99 percent
pure'," he told Reuters Television.
At Fonterra's first international auction of its dairy
products since news of the contamination - which didn't include
those products connected with the scare - prices slipped 2.4
percent, but stayed near their recent high levels on the back of
strong demand from growing middle classes in emerging economies.
The fortnightly auction, the biggest wholesale marketplace
for milk powders and dairy produce, saw a near doubling in
volumes made available.
"It does not seem that the contamination issue is evolving
into a serious negative for the wider economy," Westpac
economist Nathan Penny said in a note to clients. "The world is
still paying high prices for most New Zealand products."
U.S. dairy futures fell on Tuesday, reversing recent
gains, as traders unwound speculative bets that China may shun
some dairy products from New Zealand, and instead buy from other
countries, including the United States.
One country hoping to gain is India, the world's biggest
milk producer, which sees its skimmed milk powder exports
jumping more than 50 percent in 2013/14 helped by a weak rupee
and Chinese restrictions on some New Zealand products.
"We don't have such problems. This is a very good
opportunity for India. Definitely our exports will rise this
year and in the coming years," R.S. Sodhi, managing director of
the Gujarat Milk Marketing Co-operative Federation, India's
leading milk product exporter, told Reuters.
India traditionally keeps most of its milk products at home
to meet rising domestic consumption and as the government tries
to keep a lid on local prices. Skimmed milk powder exports this
year are likely to increase to 100,000 tonnes, Sodhi said.
Separately, Fonterra said it was fined NZ$900,000 ($705,000)
by China's top economic planning agency after a review of
pricing practices for consumer dairy products in mainland China.
Five other companies were also penalised.